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Chevron (CVX) Australia Gas Discovery Doesn’t Move Stock


Chevron Corporation (CVX) has found a new gas deposit offshore west Australia with approximately 100 meters of extractable gas, or ‘net pay’ as the industry refers to it. Chevron currently owns 50% of the project, with Royal Dutch Shell (RDS.A) and Exxon Mobil Corporation (XOM) each holding 25%.

The successful well was drilled at the Achilles-1 site in the Carnarvon Basin, and Chevron did not release an estimate of the total size of the find. But the well site is near the company’s Gorgon liquified natural gas (LNG) project, which is estimated to hold some 40 trillion cubic feet of natural gas.

Just last month, Chevron and its partners announced that they would proceed with the construction of the $37 billion project to build three natural gas-to-LNG processing plants (called ‘trains’), each capable of producing 5 million metric tons/year of LNG. Chevron expects the project to have a 40-year life span.

The partners have already signed contracts with Japanese and South Korean gas companies to ship about 80% of the LNG production of the Gorgon project to these countries. Chevron also plans to sell about 2.5% of its stake in the project to its Japanese and Korean customers. First LNG shipments from Gorgon are expected in 2014.

The discovery is certainly good news for Chevron and its partners, but we’re still a long way from finding out what the new field will mean in the long run.

The natural gas that will be coming out of the Gorgon field was first discovered in 1980. That’s right, 1980. It’s taken nearly 30 years to get a commitment to develop the field, and it will take another 5 years before the first gas is pumped out.

It’s not likely that the Achilles-1 discovery will take that long to develop, but the nearly geologic time scale of hydrocarbon development means that it could take as much as 10 years to get this new development on line. And that doesn’t say anything about the cost of drilling, laying pipeline, increasing the number of LNG trains to process the gas, building ships to haul the LNG, and so forth.

That’s why this announcement has not moved Chevron’s shares any more than any of the other big energy companies. These discoveries are expected as reserve replacements for the gas the company has sold this year. The big news would be if the companies did not find any new oil or gas.

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